Exhibit 10.4
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CHANGE IN CONTROL AGREEMENT
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MTS
Systems Corporation
14000 Technology Drive
Eden Prairie, MN 55344-2290
Telephone 952-937-4000
Fax 952-937-4515
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THIS
CHANGE IN CONTROL AGREEMENT is made and entered into by and between
MTS Systems Corporation, a Minnesota corporation with its principal
offices at 14000 Technology Drive, Eden Prairie, MN 55344 (the
“Company”) and ____________________ (the
“Executive”), residing at ____________________, and
shall be effective as of this 31 st day of December,
2008
WHEREAS,
the Company considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing
the best interests of the Company and its shareholders;
and
WHEREAS,
the Executive has made and is expected to continue to make, due to
the Executive’s intimate knowledge of the business and
affairs of the Company, its policies, methods, personnel, and
problems, a significant contribution to the profitability, growth,
and financial strength of the Company; and
WHEREAS,
the Company, as a publicly held corporation, recognizes that the
possibility of a Change in Control may exist, and that such
possibility and the uncertainty and questions which it may raise
among management may result in the departure or distraction of the
Executive in the performance of the Executive’s duties, to
the detriment of the Company and its shareholders; and
WHEREAS,
it is in the best interests of the Company and its stockholders to
reinforce and encourage the continued attention and dedication of
management personnel, including the Executive, to their assigned
duties without distraction and to ensure the continued availability
to the Company of the Executive in the event of a Change in
Control; and
WHEREAS,
the Company and the Executive previously signed a Change in Control
Agreement and now desire to amend and restate that Agreement in its
entirety to exempt it from the requirements applicable to
nonqualified deferred compensation plans pursuant to Section 409A
of the Code and regulations promulgated thereunder, and this
Agreement shall be construed and administered in a manner that is
consistent with and gives effect to such intention.
THEREFORE,
in consideration of the foregoing and other respective covenants
and agreements of the parties herein contained, the parties hereto
agree as follows:
Change in Control
Agreement
1.
Term of Agreement . This Agreement shall be effective from
and after the date hereof and shall continue in effect through
December 31, 2009, and shall automatically be extended for
successive one-year periods thereafter unless the Board of
Directors of the Company (the “Board”) shall have
approved, and the Executive is notified in writing, prior to
January 1, 2010 and each January 1 thereafter, that the term of
this Agreement shall not be extended or further extended;
provided , however , that if a Change in Control
shall have occurred during the original or any extended term of
this Agreement, this Agreement shall continue in effect for a
period of 24 months from the date of the occurrence of a Change in
Control or, if an event triggering the Company’s severance
payment obligations to the Executive under Section 4(d) has
occurred during such 24-month period, this Agreement shall continue
in effect until the benefits payable to the Executive hereunder
have been paid in full. In the event that more than one Change in
Control shall occur during the original or any extended term of
this Agreement, the 24-month period shall follow the last Change in
Control. This Agreement shall neither impose nor confer any further
rights or obligations on the Company or the Executive on the day
after the end of the term of this Agreement. Expiration of the term
of this Agreement of itself and without subsequent action by the
Company or the Executive shall not end the employment relationship
between the Company and the Executive.
2.
Change in Control . No benefits shall be payable hereunder
unless there shall have been a Change in Control. For purposes of
this Agreement, a “Change in Control” of the Company
shall mean a change in control which would be required to be
reported in response to Item 6(e) on Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), whether or not the Company is
then subject to such reporting requirement, including, without
limitation, if:
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(a) Any
“person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
any subsidiary of the Company, becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company’s
then outstanding securities; or
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(b) During
any period of two consecutive years (not including any period
ending prior to the effective date of this Agreement), the
Incumbent Directors cease for any reason to constitute at least a
majority of the Board of Directors. The term “Incumbent
Directors” shall mean those individuals who are members of
the Board of Directors on the effective date of this Agreement and
any individual who subsequently becomes a member of the Board of
Directors (other than a director designated by a person who has
entered into agreement with the Company to effect a transaction
contemplated by Section 2(c)) whose election or nomination for
election by the Company’s shareholders was approved by a vote
of at least a majority of the then Incumbent Directors;
or
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2
Change in Control
Agreement
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(c) (i)
The Company consummates a merger, consolidation, share exchange,
division or other reorganization of the Company with any
corporation or entity, other than an entity owned at least 80% by
the Company, unless immediately after such transaction, the
shareholders of the Company immediately prior to such transaction
beneficially own, directly or indirectly 51% or more of the
combined voting power of resulting entity’s outstanding
voting securities as well as 51% or more of the Total Market Value
of the resulting entity, or in the case of a division, 51% or more
of the combined voting power of the outstanding voting securities
of each entity resulting from the division as well as 51% or more
of the Total Market Value of each such entity, in each case in
substantially the same proportion as such shareholders owned shares
of the Company prior to such transaction; (ii) the shareholders of
the Company approve an agreement for the sale or disposition (in
one transaction or a series of transactions) of assets of the
Company, the total consideration of which is greater than 51% of
the Total Market Value of the Company, or (iii) the Company adopts
a plan of complete liquidation or winding-up of the Company.
“Total Market Value” shall mean the aggregate market
value of the Company’s or the resulting entity’s
outstanding common stock (on a fully diluted basis) plus the
aggregate market value of the Company’s or the resulting
entity’s other outstanding equity securities as measured by
the exchange rate of the transaction or by such other method as the
Board determines where there is not a readily ascertainable
exchange rate.
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3.
Termination Following Change in Control . If a Change in
Control shall have occurred during the term of this Agreement, the
Executive shall be entitled to the benefits provided in subsection
4(d) unless such termination is (A) because of the
Executive’s death or Retirement, (B) by the Company for Cause
or Disability, or (C) by the Executive other than for Good Reason.
The Company and the Executive shall take all steps necessary
(including with regard to any post-termination services by the
Executive) to ensure that any termination described in this Section
3 constitutes a Separation from Service as defined in subsection
3(h).
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(a)
Disability . Termination by the Company or the Executive of
the Executive’s employment based on “Disability”
may occur in the event the Executive has incurred or is afflicted
with any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, and as a result, has
become eligible for and begun receiving income replacement benefits
under the terms of the Company’s long-term disability plan or
policy as may be in effect from time to time.
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(b)
Retirement . Termination by the Company or the Executive of
the Executive’s employment based on “Retirement”
shall mean termination on or after attaining age sixty-five
(65).
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Change in Control
Agreement
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(c)
Cause . For purposes of this Agreement, “Cause”
shall mean:
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(i) the
willful and continued failure by the Executive (other than any such
failure resulting from (1) the Executive’s incapacity due to
physical or mental illness, (2) any such actual or anticipated
failure after the issuance of a Notice of Termination by the
Executive for Good Reason or (3) the Company’s active or
passive obstruction of the performance of the Executive’s
duties and responsibilities) to perform substantially the duties
and responsibilities of the Executive’s position with the
Company after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed the duties or
responsibilities;
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(ii) the
conviction of the Executive by a court of competent jurisdiction
for felony criminal conduct which, in the good faith opinion of the
Company, would impair the Executive’s ability to perform his
or her duties or impair the business reputation of the Company;
or
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(iii) the
willful engaging by the Executive in fraud or dishonesty that is
demonstrably and materially injurious to the Company, monetarily or
otherwise.
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No act, or failure to act, on the
Executive’s part shall be deemed “willful” unless
committed, or omitted by the Executive in bad faith and without
reasonable belief that the Executive’s act or failure to act
was in the best interest of the Company and the Executive shall
have either failed to correct, or failed to take all reasonable
steps to correct, such act or failure to act within sixty (60) days
from the Executive’s receipt of written notice from the
Company demanding that the Executive take such action. The
Executive shall not be terminated for Cause unless and until the
Company shall have delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the Executive,
together with the Executive’s counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the
Executive’s conduct was Cause and specifying the particulars
thereof in detail.
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(d)
Good Reason . The Executive shall be entitled to terminate
his or her employment for Good Reason; provided, however, that no
such termination under this Section 3(d) shall be effective unless:
(A) the Executive provides written notice to the Chair of the Board
of Directors of the Company of the existence of a condition
specified in paragraphs (i) through (v) below within 90 days of the
initial existence of the condition; (B)
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Change in Control
Agreement
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the Company does not remedy such
condition within 30 days of the date of such notice; and (C) the
Executive terminates employment within 90 days following the last
day of the remedial period described above. For purposes of this
Agreement, “Good Reason” shall mean, without the
Executive’s express written consent, any of the
following:
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(i) the
assignment to the Executive of any duties inconsistent in any
respect with the Executive’s authority, duties or
responsibilities with respect to the Executive’s position
immediately prior to the Change in Control, or any action by the
Company that results in a diminution in such authority, duties or
responsibilities (whether or not occurring solely as a result of
the Company’s ceasing to be a publicly traded
entity);
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(ii) a
material reduction in the Executive’s base compensation in
effect immediately prior to the Change in Control;
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(iii) a
material reduction in the budget over which the Executive retains
authority;
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(iv) a
material change in the geographic location at which the Executive
must perform services for the Company; and
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iv) Any
material violation of this Agreement by the Company, including but
not limited to any purported termination of the Executive’s
employment that is not made pursuant to a Notice of Termination
satisfying the requirements of this Agreement.
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For purposes of this Section
3(d), any good faith determination of Good Reason made by the
Executive shall be conclusive. The Executive’s mental or
physical incapacity following the occurrence of an event described
above in paragraphs (i) through (v) shall not affect the
Executive’s ability to terminate employment for Good Reason
and the Executive’s death following delivery of a Notice of
Termination for Good Reason shall not affect the Executive’s
estate’s entitlement to the payments and benefits provided
hereunder upon a termination of employment for Good
Reason.
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(e)
Notice of Termination . Any purported termination of the
Executive’s employment by the Company or by the Executive
shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 9. For purposes of this
Agreement, a “Notice of Termination” shall mean a
notice that shall indicate the specific termination provision in
this Agreement relied upon and shall set forth the facts and
circumstances claimed to provide a basis for termination of
the Executive’s employment.
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Change in Control
Agreement
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(f)
Date of Termination . For purposes of this Agreement,
“Date of Termination” shall mean:
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(i) If
the Executive’s employment is terminated for Disability, 30
days after Notice of Termination is given (provided that the
Executive shall have been absent from full-time performance of
duties for at least three (3) months and shall not have returned to
the full-time performance of the Executive’s duties during
such 30 day period, in accordance with Section 3(a)
hereof);
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(ii) If
the Executive’s employment is terminated pursuant to
subsections (b) or (c) above or for any other reason (other than
Disability), the date specified in the Notice of Termination
(which, in the case of a termination pursuant to subsection (b)
above shall not be less than 10 days, and in the case of a
termination pursuant to subsection (c) above shall not be less than
10 nor more than 30 days, respectively, from the date such Notice
of Termination is given); and
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(iii) Notwithstanding
anything contained herein to the contrary, the date on which a
Separation from Service takes place.
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(g)
Dispute of Termination . If, within 10 days after any Notice
of Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual
written agreement of the parties, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not
appealable or the time for appeal therefrom having expired and no
appeal having been perfected); provided, that the Date of
Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company shall
continue to pay the Executive full compensation in effect when the
notice giving rise to the dispute was given (including, but not
limite
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